UNIT 2

CONTRACT LAW


READING 1
Contract law deals with promises which create legal rights. In
most legal systems, a contract is formed when one party
makes an offer that is accepted by the other party. Some legal
systems require more, for example that the parties give each
other, or promise to give each other, something of value. In
common-law systems, this promise is known as consideration.
In those systems, a one-sided promise to do something (e.g. a
promise to make a gift) does not lead to the formation of an
enforceable contract, as it lacks consideration.
When the contract is negotiated, the offer and acceptance must
match each other in order for the contract to be binding. This
means that one party must accept exactly what the other party
has offered. If the offer and acceptance do not match each
other, then the law says that the second party has made a
counter-offer (that is, a new offer to the first party which then
may be accepted or rejected).
For there to be a valid contract, the parties must
agree on the essential terms. These include the
price and the subject matter of the contract.
Contracts may be made in writing or by spoken
words. If the parties make a contract by spoken
words, it is called an oral contract. In some
jurisdictions, certain special types of contracts must
be in writing or they are not valid (e.g. the sale of
land). Contracts give both parties rights and
obligations. Rights are something positive which a
party wants to get from a contract (e.g. the right to
payment of money). Obligations are something
which a party has to do or give up to get those rights
(e.g. the obligation to do work).
When a party does not do what it is required to do under a
contract, that party is said to have breached the contract. The
other party may file a lawsuit against the breaching party for
breach of contract. The non-breaching party (sometimes called
the injured party) may try to get a court to award damages for
the breach. Damages refers to money which the court orders the
breaching party to pay to the non-breaching party in
compensation. Other remedies include specific performance,
where a court orders the breaching party to perform the contract
(that is, to do what it promised to do).
A party may want to transfer its rights under a contract to another
party. This is called an assignment. When a party assigns
(‘gives’) its rights under the contract to another party, the
assigning party is called the assignor and the party who gets the
rights is called the assignee.
This text deals with some of the main features of
contract law.
1.  Read the first paragraph. What is necessary for a
valid contract to be formed?
2. Now read the whole text. Which two remedies
following a breach of contract are mentioned? Are any
other options available in your own jurisdiction?
4. Read the text again and decide whether these
statements are true (T) or false (F).
1). In all legal systems, parties must give something
of value in order for a contract to be formed.
2). An offer must be met with a counter-offer before
a contract is agreed.
3). Oral contracts are not always valid.
4). If in breach, the court will always force the party
to perform the contract.
5). Assignment occurs when one party gives its
contractual rights to another party.
5. Complete these sentences using the words in the box.
breach counter-offer damages formation obligations oral contract
terms
1)  Usually, contract…...occurs when an offer is accepted.
2)  A new offer made by one party to another party is called a…...
3)  The price and the subject matter of a contract are the essential……
of a contract.
4)  A contract which is not in written form but has been expressed in
spoken words is called an….....
5)  Under a contract, a party has….. (that is, certain things it has to do).
6)  When a party does not do what it has promised to do under a
contract, it can be sued for…...of contract.
7)  A court can award…....to the non-breaching party.
6. Match the verbs in the box with the nouns they go
with in the text.
accept award breach enforce file form make
negotiate perform reject
1.  an offer 2. a contract 3. damages 4. a lawsuit
Work in pairs to discuss the question for each of the collocations:
A contract Damages A lawsuit An offer Rights
Accept
assign
award
breach
create
enforce
file
form
make
negotiate
perform
reject
transfer
withdraw
 READING 2

REMEDIES FOR BREACH OF CONTRACT

REMEDIES FOR BREACH OF CONTRACT
If a contract is broken, the injured party might be
expected to demand any of the following:
•  to have what they gave returned to them (‘restitution’)
•  compensation for their loss (‘damages’)
•  the other party to be forced to perform the contract
(‘specific performance’)
•  In the common-law tradition, damages is the usual
remedy that a court awards for a broken contract.
Restitution and specific performance are available only
in certain circumstances.
Note: Restitution literally means 'returning something to its
original state’.
Read this excerpt from a law textbook. What does
the word remedy in the text mean?

Speaking 1: Terminology
With a partner, take turns choosing and explaining one
of these terms in your own words. Can you guess which
word your partner is defining?
•  damages specific performance restitution
•  assignor assignee the breaching party
•  the non-breaching party the injured party remedy
 READING 3
CONTRACT CLAUSE
-  vessel /'vesl/
-  boat /bəʊt/
-  To be in the same boat: Cùng hội cùng thuyền, cùng
chung cảnh ngộ
-  nominate /'nɔmineɪt/: chỉ định, chọn, bổ nhiệm
-  Shipment: sự gửi hàng bằng đường biển
-  Two weeks’ notice: means advance warning about
what is going to happen, given two weeks before it is
due to happen.
-  Upon notification: means as soon as the seller has received
notification.
-  Probable readiness: refers to the first date on which it is
most likely that the buyer will make a ship available to the
seller for the purposes of loading and transporting the goods
that are the subject of the contract.
-  Notification (n) /,nəʊtifi'keɪʃn/: Sự khai báo, thông báo
-  Load (v): Bốc hàng, bốc vác, khuân vác
-  loading /'ləʊdiɳ/(n): Sự chất hàng
 QUESTIONS
1.  Which word means ship or boat?
2.  What does the clause deal with?
3. What words are used to refer to each party to the contract?
4. What do you think probable readiness means?
5. What does the word shall mean in the context of this
clause?
Language notes
•  Shall is usually equivalent to must in the language of
contracts.
•  Two weeks' notice means advance warning about
what is going to happen, given two weeks before it is
due to happen.
•  Upon notification means as soon as the seller has
received notification.
23. Complete these lists of obligations using your
own words. How are the obligations expressed in the
actual contract clause?
Buyer must:

1. Decide on the date that the goods will be shipped (=

transported by ship).
Clause 2a reads: The buyer shall nominate the date of shipment.

2. Notify (= tell) the seller of this date at least two weeks in

advance. Clause 2a reads: The buyer shall give the seller at least
two weeks’ notice of probable readiness of vessel(s).

3. Notify the seller of the approximate quantity of goods to be

loaded (= similar amount but not necessarily the exact final
amount). Clause 2a reads: ... And of the approximate quantity to
be loaded.
Seller must:
4. Arrange a port at which the goods can be loaded onto
a ship. Clause 2b reads: Upon notification of probable
readiness of vessel(s), the seller shall nominate a port
for the loading of goods.
Language notes
•  If you sue somebody, you take legal action against them.
•  A warranty is a statement that goods are of good quality,
that the seller has the right to sell them, etc.
•  A guarantee is similar, but it is a written promise, for
example to replace or repair faulty goods. A warranty is
therefore a promise about the present, while a guarantee is
about the future.
•  If you incur (receive a specified treatment) losses, you
lose money as a result of something. It is the opposite of
making a profit.
•  A chain of sales is the situation when several
transactions are related to each other, and cannot
proceed until earlier transactions in the chain have
been completed. For example, if party A wants to buy
a machine from party B and then sell that on to party
C, the second transaction obviously has to wait until
the first is completed.
Language notes
•  An out-of-court settlement is a negotiated agreement to resolve a
conflict without going to court. Going to court is a costly option
for both sides (in terms of time, money and preparation), so both
sides are often better off if they can settle out of court.
•  If you are bound by a contract, you have legal responsibilities
which you must fulfil if you are to avoid legal action.
•  The phrase to take further action is often used as a euphemism as
part of a threat to take the other party to court.
•  The implied threat in sentence 4 is: If you can’t assure us that a
breach won't happen again, we may take you to court.
LANGUAGE FOCUS
 Word formation
Verb Abstract Personal Adjective
noun noun
Assign Assignment

(non-)breaching
Negotiate
Offeror/
offeree

Reliable
Prepositions Complete the following sentences about contract
law using the prepositions in the box.
against for for in into to to under
1.  An individual or a business may enter into a contract.
2.  Anyone who is not a party …..... The contract is considered a
third party and cannot be obligated to do anything required
…......... the contract.
3.  If one of the parties breaches a contractual obligation, the non-
breaching party may file a lawsuit…......the breaching party.
4.  Furthermore, a party will not be required to perform its
contractual obligations if another party is …..... Breach.
5.  Damages are awarded …... A party ….....any loss that the party
has suffered as a result of a breach of contract.
6.  However, a party will not always be able to recover all losses
when suing ….......... damages.
The facts of the case
Your law firm has asked you to review the following case in preparation for a meeting
with a client.
Read this description of the facts of the case. What is the legal issue here?
Deep Blue Pools Ltd began as a small business in 1997, manufacturing and installing high-
quality swimming pools for private residences. It has since developed a reputation for
excellence and has received a number of lucrative contracts, generating substantial income for
the company.
Last year, Gainsborough Construction Ltd contracted with Deep Blue Pools to build one
swimming pool for each of the ten luxury properties it is currently building in south-east
England. Deep Blue Pools was paid a total of £265,600 for the work.
Sometime after their installation, it became clear that each pool was shallower than the depth
of 2.4m specified in the contract (by 25 to 50cm at different points). Deep Blue Pools claimed
that each pool was still safe for diving and there would be no loss of enjoyment.
Gainsborough Construction is claiming £312,680 to demolish and rebuild the pools to the
proper depth (cost of cure), arguing that it is entitled to its exact preference concerning the
pools’ depth. Gainsborough Construction also claims that Deep Blue Pools deliberately misled
them as to the size of the pools provided in order to reduce costs.
Deep Blue Pools says that the amount claimed is wholly disproportionate to the disadvantage
suffered by Gainsborough Construction, and that the houses are no less valuable. Deep Blue
Pools also claims that Gainsborough Construction has no real intention of effecting a cure,
and that any damages awarded would be an unfair ‘windfall’.
 THE IRAC FORMULA IN LEGAL REASONING

Issue what facts and circumstances brought these parties

to the court (the syllogism’s subject matter)
Rule what is the governing law for the issue (the
syllogism’s major premise)
Analysis Does the rule apply to these unique facts (the
syllogism’s minor premise)
Conclusion How does the court’s holding modify the rule of
law (the syllogism’s conclusion)
 1.  Issue

“The facts of a case suggest an issue”

The key to issue spotting is being able to indentify

which facts raise which issues. Because of the
complexity of the law, the elimination or addition of
one fact (such as time of day or whether someone was
drinking) can eliminate or add issues to a case
thereby raising an entirely different rule of law.
Issue is the first step of IRAC method

•  Issue: what facts and circumstances brought these

parties to the court.

•  The most important element in the analysis and must

be stated in the way to show what is in controversy.
 2. Rule

“The issue is covered by a rule of law”

The rule is the law. The rule could be common law

that was developed by the courts or a law that was
passed by the legislature. The overall question
regarding the discover of rules is that what elements
of the rule must be proven in order for the rule to hold
true.
 3. Analysis
“compare the facts to the rule to form the analysis”
There are lots of facts that make up the client’s story.
For the purpose of legal analysis, we look for
“material” facts. These are facts that fit the elements of
the rule.
 4. Conclusion
The conclusion is the shortest part of equation. It
can be simple “yes” or “no” as to whether the
rule applies to a set of facts.